As an adviser it is no surprise I try to keep up to date with everything surrounding personal finance. This is not just for the continuing professional development requirement but also that I am passionate about the subject and want to be able to give my clients the best. Of course, the general public have different priorities and are not likely to be as up to date. But this can cause problems.
One such example of this difference in knowledge is highlighted by the current Women Against State Pension Inequality (Waspi) campaign.
Waspi is campaigning against what it sees as unfair changes to the state pension age imposed on women born in the 1950s. It is asking the Government to make fair transitional arrangements for all women born on or after 6 April 1951 who have “unfairly” borne the burden of the increase to the state pension age. Hundreds of thousands of women have had significant changes imposed on them with what Waspi considers a lack of appropriate notification.
The use of “inequality” is unfortunate, given the changes were all about achieving equality between men and women’s retirement age, itself prompted by a legal challenge by a group of men that claimed their retirement age of 65 compared with women’s of 60, was discriminatory.
Naturally, rather than reducing men’s state pension age from 65 to 60, the Government equalised the age at 65 for both men and women (ultimately increasing to 68). This was decided in 1995, with later changes in 2011.
As with all changes like this, there are losers. The Government could certainly have done more to inform people earlier. However, even if they had been made aware earlier, there is little most women could have done as those most affected are in low-paid employment with little savings. Unsurprisingly, there are examples of women who have taken early retirement safe in the supposed knowledge their state pension would commence at 60 that now face up to five years with little or no income.
However, perhaps the biggest lesson from this affair should be those retiring early could have taken professional financial advice. Had they done so, they would have either been informed of the increasing state pension age or at least have a valid claim against that adviser. Unfortunately the vast majority of the general public still do not want to take professional advice.
The FCA’s Financial Advice Market Review paper calling for input into this listed eight reasons that stop people seeking advice. With regard to the state pension age increase overconfidence (“some consumers might believe they are as competent as a professional adviser, even though in reality they could benefit from using one”) and advice not necessary (“consumers may make a rational and reasonable decision that they do not need advice”) are perhaps the most relevant.
I would suggest these two points are arguably one and the same, and Waspi’s campaign is evidence the public is far too over-confident in its knowledge. It is a simple case of you do not know what you do not know.
Unfortunately I do not think this lesson will be considered by Waspi or the general public, who are simply looking for someone to blame.
Scott Gallacher is director of Rowley Turton